Reliance takes £7.4m charge

Reliance Security yesterday warned it would take exceptional non-cash charges of £7.4m in its full-year results because of "incorrect" accounting and an investment write-down.

Reliance Security yesterday warned it would take exceptional non-cash charges of £7.4m in its full-year results because of "incorrect" accounting and an investment write-down.

The news sent shares in the security equipment and services provider tumbling 122.5p to 505p, valuing the business at £117.7m. The shares, which hit their lowest level in about 14 months, have been on the slide since May when they reached a high of 817.5p.

Reliance Security said £5.3m of the charges related to its purchase in August of the remaining 50 per cent of shares it did not already own in Reliance High Tech, which installs electronic security systems.

The group said that since it bought out the business "it has emerged that the accounting for costs and work in progress for the installation of electronic security systems has, over a number of years, been incorrect". It has since strengthened the finance function by enlarging the department and installing new systems and controls. "The directors of Reliance are confident that a sound system of internal financial control is in place throughout the group," it said.

Reliance also said it would write down its 16 per cent stake in property agent Chesterton International by £2.1m in its accounts after deciding to account for the investment at its market value. Reliance said: "This approach has been adopted as a matter of prudence and does not reflect the directors' view of the ultimate realisable value of the investment." Chesterton, whose shares were changing hands for 21p each yesterday, valuing Reliance's stake at £2.9m, said recently it was in early stage bid talks.

Brian Kingham, Reliance's chairman, said: "These one-off charges to profits, whilst not affecting cash, are regrettable. Swift action has been taken to deal with the accounting issues in Reliance High Tech."

He said the company's underlying trading performance was in line with his expectations. "We are confident that we are well placed to achieve long-term growth in shareholder value."